South Korea is likely to enjoy brisk export growth at least until the end of the year, but a recovery in domestic consumption still appears some months away, Finance Minister Lee Hun-jai said on Friday.
Supporting his view, data released on Friday showed the country's major department store sales dropped 11 percent in March from a year ago, the largest percentage fall in five months.
A delayed turnaround in domestic consumption keeps policy makers worried that the economic recovery will remain vulnerable to exchange rates and economies in major countries like China and the United States.
Lee made the comments at a weekly media briefing a day after the central bank upgraded its 2004 economic growth forecast to as high as six percent, citing stronger-than-expected exports.
A fresh central bank survey also showed firms remained gloomy about future conditions despite near 40 percent growth in first-quarter exports.
"Fortunately, economies in our major trading partners of the United States, Japan and China, sustained a stable growth pace despite the unstable oil market and rises in raw material prices," Lee said.
"Growth in some European Union countries is comparatively slow but most other countries show a stable growth pattern, and so I expect our high export growth to last at least through this year," he said.
China, the United States and Japan roughly account for a combined 40 percent of South Korea's total exports, and sales to China are growing by about 50 percent on the year. Exports have been the main driver of South Korea's economic recovery since last year.
But Lee said domestic consumption was lagging and might not pick up significantly until around the end of the first half.
Department store sales are expected to rise 0.5 percent in April, the government estimated, turning around from March's slump due to heavy snow and a seasonal decline in wedding-related goods sales.
However the Bank of Korea said a poll showed the majority of local companies remained pessimistic about future business conditions as a recovery in domestic consumption lagged.
The bank's business survey index (BSI) was 90 in April, close to March's figure of 91, which was the highest level since January last year. But the survey showed the majority of firms were still gloomy about business prospects.
A reading below 100 means more firms see their business deteriorating in the month than those expecting an improvement. The central bank surveyed 2,900 companies.
The index has not topped 100 since the last quarter of 2002.
Economists said a domestic political instability surrounding the parliamentary impeachment of President Roh Moo-hyun last month and ahead of April 15 general election were an additional factor keeping consumers anxious.
Comments
Comments are closed.